(Reuters) - Wall Street's industry-funded watchdog issued new guidance late Monday that gives arbitrators more information about their responsibilities in a process that allows securities brokers to request the removal of customer complaints from their public records.

The Financial Industry Regulatory Authority (FINRA) issued the guidance just days before a group of lawyers for investors plan to issue a report finding fault with the regulator's system for clearing complaints from brokers' records, a process known as "expungement."

"Expungement is an extraordinary remedy that should be granted only under appropriate circumstances," FINRA wrote in the guidance, posted on its website. "Information should be expunged only when it has no meaningful investor or regulatory value," FINRA said.

FINRA makes brokers' professional histories publicly available through its BrokerCheck database, a free service through which investors can check out a broker's credentials. Expunging customer complaints can undermine the integrity of that system, lawyers say. Brokers, however, say some of the complaints are frivolous or unfair because they involve, for example, the failure of entire classes of securities that their firms assured them were safe.

The guidance suggests, among other things, two new steps for arbitrators when considering a broker's expungement request: reviewing all disclosures in the broker's disclosure report and asking whether the expungement request followed a settlement between an investor and the broker's firm in which the investor agreed not to oppose the request.

"This is the first step towards eliminating the practice of purchased expungements," said Ryan Bakhtiari, a lawyer in Beverly Hills, California, who represents investors in securities arbitration cases.

A FINRA spokeswoman was not immediately able to comment.

The guidance followed a recent surge of recommendations by FINRA arbitrators to clear details about complaints from customers from brokers' records. An informal study conducted earlier this year by New York-based securities lawyer Seth Lipner revealed that brokers who asked arbitrators for expungement after investors' cases settled succeeded 93 percent of the time.

A report to be released on Wednesday by the Public Investors Arbitration Bar Association, a group of lawyers who represent investors in securities arbitration cases, will show "an alarming increase" in that circumstances, the group announced Monday.

Brokers typically resort to the expungement process after investors file arbitration complaints against brokerages involving transactions in which individual brokers are involved. If the investor agrees as part of a financial settlement not to oppose a future proceeding by the firm or broker to erase those details, they can be more easily expunged from the broker's record.

To have details of an arbitration complaint erased, a broker must get a court order, after getting a decision from arbitrators to recommend expungement.